"The WiMax performance is astounding," Barry West, chief technology officer for Sprint Nextel, told reporters and analysts at the press conference in New York earlier this week. "But that's all meaningless unless you offer a service at a price that people can afford or are willing to pay."
Today Sprint offers an unlimited bandwidth wireless broadband service using its EV-DO network for US$80 per month. The service has proven popular among some business travelers because it's more reliable and more ubiquitous than using Wi-Fi hot spots to access the Internet. But the cost, which includes the purchase of a US$100 network card, is still too high for most casual consumers.
"Studies indicate that the average consumer is willing to spend about US$40 a month for their cell phone," Mathias said. "So US$60 to US$80 for a data package is definitely more in the price range of the business user and not the consumer."
There are several reasons why Sprint and other 3G wireless broadband providers haven't lowered their prices or haven't yet embedded EV-DO in more devices including consumer electronics products. One reason is the fact that EV-DO chipsets are still expensive to make. Unlike Wi-Fi chipsets, which equipment makers can get for about US$10 a piece, EV-DO chips are much more expensive, thus driving up the cost of the service.
Indeed, this is what Sprint and its suppliers, Motorola, Intel and Samsung, say is WiMax's main selling point. These companies claim the chipsets that will be used in the devices and to build the infrastructure equipment will cost about a 10th the price of existing 3G chipsets.
Mobile WiMax also was recently standardized, a designation not yet bestowed on competing technologies. The fact that mobile WiMax has been standardized will help further reduce costs by allowing more suppliers to easily enter the market.
This, coupled with the fact that Intel, which essentially built the Wi-Fi network, is a big backer of the technology, could eventually spur greater adoption and higher supply volumes, making WiMax even cheaper. Many backers of WiMax are hopeful that these factors will help the technology follow a similar path as Wi-Fi, which is so cheap today that it's embedded as a standard practice in most laptops and is even making its way into other devices such as dual-mode handsets and some consumer electronics products.
"Embedding Wi-Fi chips into devices is a lot more cost-effective than doing it with EV-DO Revision A chips," said Samsung's Barton. "Most consumers aren't going to pay a heavy premium for wireless access, but they may be willing to pay a little more for the functionality."
But Sprint's executives say they aren't abandoning their existing 3G network. In fact, the company said last week that it plans to expand and upgrade its existing EV-DO network to a faster version of the technology called EV-DO Revision A.
"We will continue to grow our current EV-DO revenue streams," West said during the press conference. "But with WiMax we're creating a new market. We see revenue streams that don't exist today in Sprint's profile, and this gives us a significant advantage."
Sprint is convinced that by using WiMax it can offer customers a much faster service that will allow them to access and share richer content such as videos, music and pictures over a multitude of devices. And the company expects to do this at a price consumers can afford.
"My belief is that mobile broadband will completely change our lives," West said. "And Sprint will be there to make it happen."
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